Estimate at completion (EAC)

Description

Earned value management (EVM), earned value project management, or earned value performance management (EVPM) is a project management technique for measuring project performance and progress in an objective manner.

In addition to managing technical and schedule performance, large and complex projects require that cost performance be monitored and reviewed at regular intervals. To measure cost performance, planned value (or BCWS – Budgeted Cost of Work Scheduled) and earned value (or BCWP – Budgeted Cost of Work Performed) must be in units of currency (the same units that actual costs are measured.) In large implementations, the planned value curve is commonly called a Performance Measurement Baseline (PMB) and may be arranged in control accounts, summary-level planning packages, planning packages and work packages. In large projects, establishing control accounts is the primary method of delegating responsibility and authority to various parts of the performing organization. Control accounts are cells of a responsibility assignment (RACI) matrix, which is the intersection of the project WBS and the organizational breakdown structure (OBS). Control accounts are assigned to Control Account Managers (CAMs). Large projects require more elaborate processes for controlling baseline revisions, more thorough integration with subcontractor EVM systems, and more elaborate management of procured materials.

EAC is the manager’s projection of total cost of the project at completion.

This formula is based on the assumption, that the performance of the project (or rather a deviation of the actual performance from a baseline) to date gives a good indication of what a performance (or rather deviation of a performance from a baseline) will be in the future. In other words this formula is using statistics of the project to date to predict future results. Therefore it has to be used carefully, when the nature of the project in the future is likely to be different from the one to date (e.g. performance of the project compare to baseline at the design phase may not be a good indication of what it will be during a construction phase).

Related formulas

Variables

EACEstimate at completion ($)
BACBudget at completion ($)
CPICost Performance Index (dimensionless)